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A combination of the two companies – both named after their founders, both still imbued with a family-run business ethos – will bring together historic brands such as Wrigley's Spearmint and Juicy Fruit gum with the Mars bar, Twix and Starburst sweets. The idea is to create a marketing powerhouse able to carve out the best spots on supermarket shelves and at the corner store check-out, and the announcement of the merger yesterday sparked talk of another round of consolidation in the global confectionery industry.

"It's not about selling out for dollars, I want to see us grow," said Bill Wrigley, chairman of the chewing gum company and great-grandson of its founder. And in a letter to employees yesterday, Mr Wrigley added that Mars had promised to keep the existing company management in place and keep interference in the business to a minimum. "I've spent a considerable amount of time with their leadership team and Mars family members, and I do take them at their word on this."

The deal will leave Wrigley as a stand-alone subsidiary inside Mars, responsible for all the combined group's non-chocolate confectionery. That means the Mars brands Starburst and Skittles will be sold through Wrigley.

The Wrigley business will be part-owned by Mr Buffett's investment company Berkshire Hathaway, which is also financing some of the debt for the deal. The disruptions in the credit markets led Mars to seek innovative sources of financing, and it contacted Mr Buffett this month. Berkshire Hathaway is extending $4.4bn of debt and will buy a stake of more than 10 per cent in the company for a further $2.1bn.

"I have been a big fan of Wrigley's business model for many years, and I love their products," Mr Buffett said. "When you think of a business that's easy to understand, with favourable long-term economics, and able and trustworthy management, you think of Wrigley." The veteran investor, who overtook Bill Gates to become the world's richest man this year, has a penchant for consumer brands and has had long-standing holdings in Coca-Cola and McDonald's. These types of companies, he says, are much less likely to blow up than hard-to-follow technology or financial companies.

Both companies insisted yesterday that Wrigley's headquarters would stay in Chicago. The Wrigley family is one of the city's most famous dynasties, descended from the company founder William Wrigley Jr, who ran away from home in Pennsylvania to sell newspapers, then soap, then baking powder, before alighting on chewing gum. The Wrigley name is on a string of important buildings in Chicago.

Paul Michaels, president of Mars Global, said: "Mars and Wrigley have much more in common than multi-generational family leadership and significant global footprints. We share common values and ways of doing business, including an emphasis on ethics and respect for people, and expertise in building enduring brands."

Mars itself maintains hints of a paternalistic culture and it is fiercely proud of its status as a private company, saying it gives it freedom from the short-term demands of a stock market listing. None the less, yesterday's deal came as a surprise in the industry, where many had expected Mars would itself be a takeover target. The family patriarch, Forrest Mars Snr, died in 1999 at the age of 95.

Its combination with Wrigley would be completed within the next nine months, the companies said, and managers expected little interference from competition authorities. Mars gets more of its annual sales from pet food than it does from chocolate; it has negligible income from sweets and none at all from gum. When approved, the deal will push Mars into first place in the global confectionery market, leapfrogging Cadbury Schweppes.

Mitchell Corwin, analyst at Morningstar, said he expected the deal would be approved by Wrigley shareholders, not least because it is pitched at a 28 per cent premium to the closing share price on Friday night.

"The two candymakers have tremendous competitive advantages, strong international footprints [Wrigley currently derives two-thirds of its revenue outside North America], and astute management teams that think long term," said Mr Corwin. "This deal creates a worldwide confectionery powerhouse with combined market share of around 14.4 per cent, compared with 10.1 per cent for current leader Cadbury Schweppes."

Almost as soon as the Mars announcement was out yesterday, speculation switched to future merger activity in the industry. The takeover of Wrigley, it was argued, might finally be the jolt required to get Hershey, the US chocolatier, talking to Cadbury after years of rebuffing its merger overtures.

The market was certainly optimistic last night: Hershey shares jumped 4.6 per cent in New York; Cadbury Schweppes closed up 15.5p – 2.8 per cent – at 579p in London.

Rise of two confectionery giants

*Mars

History: Founded in 1911 by Frank C Mars, who made and sold butter cream candies in Tacoma, Washington state. The first blockbuster product was the Milky Way (later known in Europe as the Mars Bar), which was invented by Frank and his son Forrest in 1923. Mars bought Chappie, a UK dog food company, in 1935.

Ownership: Still controlled by the Mars family. The founder's grandchildren – Forrest Jr, Jacqueline and John Mars – are said to be worth $14bn each.

Size: Annual sales of $22bn, from operations in 66 countries, employing 48,000. About 51 per cent of its sales are in Europe, 37 per cent in the Americas.

History: In 1892, a Chicago baking powder salesman, William Wrigley, started giving away chewing gum as an incentive to buy his products, but found that the gum was more popular. In 1920, he commissioned the Wrigley Building for a headquarters. It became a Chicago landmark.

Ownership: The company has been managed by four generations of the Wrigley family, but their control has been diluted since its stock market flotation in 1919. The chairman, Bill Wrigley, great-grandson of the founder, will net $9.7m from the sale to Mars.

Size: Sales of $5.4bn from more than 180 countries. Employs 15,000, including 700 in the UK.

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